Responsible Investment

Private equity and venture capital are committed responsible investors. The focus by the industry on measuring, managing and mitigating environmental, social and governance (ESG) risks has grown substantially since the financial crisis.

What was once a reputational issue has now become a mainstay of the private equity approach – many institutional investors, as signatories to the UN Principles for Responsible Investment, now expect fund managers to be able to demonstrate a deeper commitment to ESG issues by having a coherent and structured framework in place.

ESG risks are now considered to have a material impact on investment valuation. Many private equity and venture capital houses have already recognised the value of ESG initiatives, not only in achieving environmental and social change, but also in reducing costs and minimising risks.

An in-depth introduction to Responsible Investment, why it matters, and insights on how to integrate environment, social and governance (ESG) considerations into investment strategies can be found in the Responsible Investment Toolkit, the latest iteration of the BVCA’s Responsible Investment Guides. Now online, the toolkit provides practical advice throughout the investment life-cycle, from due diligence through to exit, as well as at the house level and includes case studies, illustrating responsible investment in action.

Responsible investment is considered fundamental to value creation. Some of the best examples can be found in the winners of the BVCA Responsible Investment Awards, our platform for members to showcase their commitment and success to integrating ESG practices into their investment strategies.

ESG Disclosure Framework

A new Environmental, Social and Corporate Governance (ESG) Disclosure Framework for Private Equity was released on 25 March 2013, following a 16 month consultation and drafting process that involved a group of more than 40 limited partners (LP), 20 Private Equity Associations (including the BVCA), and 10 leading general partners (GP).

The Framework is in response to changing and diverse expectations for the disclosure of ESG information from GPs and on their portfolio companies.

The Framework aims to:

Provide guidance on the rationale behind LP's ESG-related questions

Facilitate an informed discussion between GPs and their LPs, and

Be used as a practical tool and not as a prescriptive rule.

Outline of the Framework

There are two parts to the framework covering:

Disclosures during fundraising, where the GP should seek to disclose information sufficient to enable an LP that has expressed an interest in ESG management to meet five objectives. These objectives include alignment of policy and the GP's approach to ESG and policies, processes and systems in place.

Disclosures during the life of the fund, where the GP should disclosure information to meet three objectives including whether the GP is acting in a manner consistent with its investment policies re ESG management.

The Framework includes a set of questions LPs may use to assist them in addressing the 8 objectives. Read more

BVCA Responsible Investment Toolkit (2017)

Launched in October 2017, this new online guide is an introduction to what responsible investment is, why it matters, and provides insights on how to integrate environment, social and governance (ESG) considerations into investment strategies. Practical advice is provided throughout the investment life-cycle, from due diligence through to exit, as well as at the house level, and the toolkit includes updated case studies illustrating responsible investment in action.

BVCA Guide to Responsible Investment (2015)

Published in March 2015 and produced in association with PwC, this supplement to our Guide to Responsible Investment shows how private equity and venture capital-backed companies are putting environmental, social and governance policies into practice and features a series of case studies drawn from entries to the BVCA’s Responsible Investment Awards over the last two years. The supplement looks at examples from both firm and portfolio level.

BVCA Guide to Responsible Investment (2014)

Published in February 2014, the BVCA Guide to Responsible Investment contains new guidance and case studies which take into account the changing nature of the responsible investment agenda, providing private equity and venture capital fund managers with a reference tool on how to manage environmental, social and corporate governance (ESG) risks and opportunities. This guide provides detailed and practical advice on how ESG factors can be managed throughout the life cycle of investments.